A Contribution to Health-Capital Theory

Titus Galama

No 2015-008, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: The Grossman model is the canonical theory of the demand for health and health investment. This paper provides strong support for the model's canonical status. Yet several authors have identi?ed at least four signi?cant limitations to the literature spawned by Grossman's seminal 1972 papers. I show that these criticisms are not the result of a ?awed model but of an unfortunate and unnecessary choice for the functional form (linear in investment) of the health-production process, and of an incorrect interpretation of the equilibrium condition for health. I ?nd that a generalized Grossman model, with decreasing returns in investment and endogenous longevity, addresses the limitations, and provides a remarkably successful foundation for understanding decisions regarding health.

Keywords: socioeconomic status; Health; demand for health; human capital; health behavior (search for similar items in EconPapers)
JEL-codes: D91 I10 I12 I14 J24 (search for similar items in EconPapers)
Date: 2015-06
Note: HI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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http://humcap.uchicago.edu/RePEc/hka/wpaper/Galama_2015_health-capital.pdf First version, April 2015 (application/pdf)

Related works:
Working Paper: A Contribution to Health Capital Theory (2011)
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